TaxTMI 
TaxTMI 
2026 (9) TMI 1037
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....on the suspicion that they were passing on inadmissible credit, on the basis of cenvatable invoices of non-ferrous metals, to the manufacturers of excisable goods namely Malhotra Cables P. Ltd., Unit I & II and M/s. Kopertek Metals P. Ltd. without physical delivery of the goods. 3. During the said investigation, the DGCEI searched various premises belonging to Shri Amit Gupta and certain incriminating documents, unaccounted ferrous metal and unaccounted cash and Goods were detained, which were seized later. SCNs dated 04.06.2013 were issued. However, the same are not part of instant proceedings. Investigation was also conducted from Shri Mohit Gupta, brother of Amit Gupta, who stated to have been working on the directions of his brother. 4. Shri Amit Gupta allegedly stated that he was importing goods through various companies and sold the same in cash in local market; was supplying bills of said companies to manufacturer of excisable goods; he used bilties of M/s. Leo Trans & Logistics and prepared fictitious transportation documents, showing the vehicles HR38 M 0956, HR38 L9792, HR38 M2114, though the said vehicles were never used for transportation of goods; the payments fo....
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....oods mentioned in the invoices issued by entities controlled by Mohit Gupta. On the basis of investigation from transporters, the DGCEI concluded that no goods were actually supplied by Amit Gupta. 6. The Scrutiny of documents maintained by Amit Gupta, which contained date wise detail of cash transactions with various customers/suppliers for the period from 17.08.2011 to 04.12. 2012, shows the mention of the name of customers including Rathi Steel. Shri Amit Gupta admitted on 06.12.2012, that he maintained said documents on day-to-day cash transactions basis. It was observed that cash transactions with Appellant were found recorded under various names like Anil Trading Co., Anil Rathi, Rathi, Rathi Steel and Rathi Steel Anil Trading Co. DGCEI scrutinized the documents having details of persons to whom the scrap was sold by Amit Gupta in cash. However, no enquiry appears to be made of the persons. It was concluded by the DGCEI that Amit Gupta purchased unaccounted scrap from market on which no cenvat credit was admissible and sold the same to various manufacturers 7. Investigation was conducted about code names found in the documents/ Ledgers recovered from Amit Gupta. With re....
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....f department was correct. Case of Appellant: 10. Learned Counsel for the appellant submits that the Appellant is a limited company engaged in the manufacture of TMT Bar/Wire Rod, SS Round in Coil/SS Billet since long for over 40 years. The raw materials used are Scrap/ SS Scrap (6070%); Ferro Chrome/ Manganese/Silicon; Silicon Manganese; Copper (.70 to .90%); Nickle; Molybdenum; Gases The major share of raw material is MS/SS Scrap which contribute around 60% to 70% depending upon the grade and quality of final product. The contribution of copper varies from .70% to .90% depending upon the requirement of customer; Manufacturing process requires melting of various metals; irrespective of the nomenclature of the material used, the same is melted; therefore, the Appellant is not much concerned about the description given on the invoice accompanying the goods; though the Appellant was mainly importing scrap, in certain cases, they procured the same from domestic sources from traders/importers registered with excise department only; in general, the cost of transportation of goods to the factory was borne by the supplier of goods; entire copper in dispute was procured from outside U....
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.... examination was in a delayed manner and that the persons have changed the versions and that belated change in stand was not acceptable; since the key persons did not retract their statements for over a period of six years; since statements of certain persons were recorded multiple times, but still they did not retract the same, it was sufficient to show that retraction during the cross examination was not permissible. Counsel submits that the SCN was issued in 2015 and hearing was fixed in 2018; there was no way appellants could have asked for cross examination before SCN; the reasoning adopted in the impugned order in the manner stated above is contrary to settled law and judicial discipline. the right to cross examination could be claimed by the Appellant only after receipt of SCN. In the instant case, the Appellant requested for cross examination of Mohit Gupta, Anil Gupta-Broker and Ram Chander Rathore; they did not turn up; there is nothing in the impugned order as to what efforts were made by the department in this regard; thus, their testimony could not be relied upon as held in J & K Cigarettes reported in 2009 (242) ELT 180 (Del.), Ambika International reported in 2018 (3....
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....ply of goods by Shri Amit Gupta over a period of time; Tribunal and even the appellate authority has set aside such demands raised on similar set of evidences; impugned order takes note of said decision but no findings have been given distinguishing the same. * The adjudicating authority records that the appellant's contention that they were placing orders, on Shri Anil Gupta, broker, for copper scrap and that Shri Anil Gupta, Broker stated that he knows Pradeep Rathi and that he had supplied copper scrap to RSPL; however, department did not investigate as to who is arranging invoices for Anil Gupta; no further investigation was conducted by the department to know the whereabouts of the persons mentioned by Shri Anil Gupta even though an allegation of transfer of wrongful credit of Rs 29 Cr and sale of scrap worth Rs 344 Cr in cash was involved; no case of department survives on the basis of investigation conducted in this manner; unless the department proved that the appellant was involved in the alleged manipulation on the part of supplier of goods, the department could not deny credit to RSPL and that too by invoking extended period. * Investigation accepts the....
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....p or finished goods tested; no physical stock vis a vis invoice was checked; therefore, said allegation is without any basis. * even prior to 6.12.2012 the department was having information about the so-called manipulations; yet, the department did not intercept even a single vehicle on way to any of the customers of Shri Anil Gupta; if the department been serious in its investigation, it would have reached to the factories of all customers and not only of the appellant; * the department seeks to deny credit availed by the appellant from 12.03.2011 to 05.12.2012; but department visited factory of Appellant only on 12.11.2014 and that too for getting the amount reversed on account of cenvat credit said to be claimed irregularly. 14. Learned Counsel further submits vide written submissions that the manner in which investigation proceedings took place itself was sufficient to show that the petitioner was forced to reverse the credit voluntarily. He submits that first summon was issued by the DGCEI on 27.02.2013; petitioner submitted, vide letter dated 15.03.2013, the desired information/documents; final reply was submitted vide letter dated 07.10.2014; investigati....
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....t on the strength of invoices for supply of non-ferrous metals to different manufacturers without actually supplying the material. Statement of various persons have been recorded and accordingly a case has been made against 68 companies/persons demanding reversal of inadmissible credit or proposing to impose penalty. The impugned case before us is about the demand of inadmissible credit availed by the Appellant i.e. M/s Rathi Steel and Power Ltd. against whom a demand of Rs.2,39,61,066/- was confirmed along with equal penalty. The defence of the Appellants is that the case is made only on the basis of the statement of various persons some of which have been retracted; Department could not produce many persons for cross-examination before the Adjudicating Authority; thus the Appellants have not been given an opportunity to cross-examine the persons whose statements were relied upon for the purpose of the proceedings; the Appellants did not agree with the statements of other persons; such statements were contradictory to each other and there was no evidence against the Appellants other than the statements as submitted by them as discussed above. 18. We find on going through the im....
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....id by the tax payer in case of any default in payment of tax for the period of default; that the issue with regards to statutory levy of interest is no longer res Integra. In the instant case, it is clearly established that the demand is sustainable and hence I find that the assessee are liable to pay interest on the demand at applicable rates. Since they have failed to pay the applicable Central Excise Duty/reverse the wrongly availed Cenvat credit, within the prescribed time limit, they are liable to pay interest under the provisions of Section 11AA of the Central Excise Act, 1944 from the due date of payment, till the actual date of payment. 172. The notice has also proposed to impose a penalty under Rule 26 of Central Excise Rule, 2002 on the Directors/proprietors/persons responsible for effecting purchases in the alleged recipient entities for their role in the evasion of Central Excise Duty by way of availment of CENVAT Credit of invoices, without any actual receipt of goods. The aforesaid persons in the companies/entities are stated to be responsible for wilfully suppressing the facts, hiding the eligible CENVAT credit and purchases and contraventions of the provisi....
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....erusal of the above indicates that the authority has given a general finding without looking into the peculiar facts of the case of Appellant herein. Appellant's claim that they received the goods along with invoices has not been countered by evidence. It is seen that the entire case of department is primarily based on the testimony of Shri Amit Gupta whereas, the allegation against the appellant is that Shri Mohit Gupta supplied the goods to the appellants through a broker. The investigation did not bring these two face to face or with the MD of the appellant to cross verify. Department tried to build a case with individual silo like statement without any inter-connection. The adjudicating authority did not examine either Shri Amit Gupta or Shi Mohit Gupta. It is pertinent to say that the transporter, broker both categorically stated that the goods were supplied to the Appellant under the cover of invoices and there has been no evidence of whatsoever nature that the Appellant was involved in so called manipulation on the part of Amit Gupta. In fact, as per department the key person was Amit Gupta whereas in the instant case, the dealing was between Anil Gupta broker and Mohit Gupt....
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....fter knowing about their statements on receipt of Show Cause Notice and in reply to the same, cannot be brushed aside. We are of the considered opinion that such an investigation and the order issued on the same cannot be upheld. This has been the stance taken by the Tribunal consistently. 23. We further find that in the impugned case, the Appellant had retracted any statement. The evidence relied upon was by third party. It was provided to the Appellant only at the time of supply of SCN and therefore, it was obvious that cross examination, if any, could be asked after that only. In any case, the cross examination was conducted before adjudication and the same had legal sanctity. Further, there is nothing in the impugned order as to why cross examination of all the witnesses could not be conducted. Therefore, the adjudicating authority was not supposed to rely upon the statements of said persons whose cross examination was not conducted. We find that the Appellants relied upon J&K Cigarettes 2009(242) ELT 180 (Del.); Ambika International 2018(361) ELT9(P&H) and SK Garg 2017(348) ELT (Tri. Chennai). Even otherwise, if the witness of department became hostile during cross examinat....
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....ce. Once this determination regarding admissibility of the statement of a witness is made by the adjudicating authority, the statement will be admitted as an evidence and an opportunity of cross-examination of the witness is then required to be given to the person against whom such statement has been made. It is only when this procedure is followed that the statements of the persons making them would be of relevance for the purpose of proving the facts which they contain. 22. It would now be appropriate to examine certain decisions interpretating section 9D of the Central Excise Act and section 138B of the Customs Act. 23. In Ambika International vs. Union of India [2018 (361) E.L.T. 90 (P&H)] decided on 17.06.2016, the Punjab and Haryana High Court examined the provisions of section 9D of the Central Excise Act. The show cause notices that had been issued primarily relied upon statements made under section 14 of the Central Excise Act. It was sought to be contended by the Writ Petitioners that the demand had been confirmed in flagrant violation of the mandatory provisions of section 9D of the Central Excise Act. The High Court held that if none of the circumstanc....
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....judicating authority, under clause (b) of Section 9D(1), viz. (i) the person who made the statement has to first be examined as a witness in the case before the adjudicating authority, and (ii) the adjudicating authority has, thereafter, to form the opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice. 23. There is no justification for jettisoning this procedure, statutorily prescribed by plenary parliamentary legislation for admitting, into evidence, a statement recorded before the gazetted Central Excise Officer, which does not suffer from the handicaps contemplated by clause (a) of Section 9D(1) of the Act. The use of the word "shall" in Section 9D(1), makes it clear that, the provisions contemplated in the sub-section are mandatory. Indeed, as they pertain to conferment of admissibility to oral evidence they would, even otherwise, have to be recorded as mandatory. 24. The rationale behind the above precaution contained in clause (b) of Section 9D(1) is obvious. The statement, recorded during inquiry/investigation, by the gazetted Central Excise Officer, has ever....
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....n evidence, that the question of offering the witness to the assessee, for cross-examination, can arise. 28. Clearly, if this procedure, which is statutorily prescribed by plenary parliamentary legislation, is not followed, it has to be regarded, that the Revenue has given up the said witnesses, so that the reliance by the CCE, on the said statements, has to be regarded as misguided, and the said statements have to be eschewed from consideration, as they would not be relevant for proving the truth of the contents thereof." (emphasis supplied) 24. The Punjab and Haryana High Court in Jindal Drugs that was decided on 21.06.2016 also held that unless and until one of the circumstances contemplated by clause (a) of section 138B(1) of the Customs Act applies, the adjudicating authority is bound to strictly follow the procedure contained in clause (b) of section 138B(1) of the Customs Act, before treating a statement recorded under section 108 of the Customs Act as relevant. 25. In Hi Tech Abrasives Ltd. vs. Commissioner of C. Ex. & Cus., Raipur [2018 (362) E.L.T. 961 (Chhattisgarh)] decided on 04.07.2018, the Chhattisgarh High Court also examined t....
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....by the Investigation Officers cannot be treated to be relevant piece of evidence on which a finding could be based by the adjudicating authority. A rational, logical and fair interpretation of procedure clearly spells out that before the statement is treated relevant and admissible under the law, the person is not only required to be present in the proceedings before the adjudicating authority but the adjudicating authority is obliged under the law to examine him and form an opinion that having regard to the circumstances of the case, the statement should be admitted in evidence in the interest of justice. Therefore, we would say that even mere recording of statement is not enough but it has to be fully conscious application of mind by the adjudicating authority that the statement is required to be admitted in the interest of justice. The rigor of this provision, therefore, could not be done away with by the adjudicating authority, if at all, it was inclined to take into consideration the statement recorded earlier during investigation by the Investigation officers. Indeed, without examination of the person as required under Section 9D and opinion formed as mandated under the law, ....
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....irectly flows from Section 138B(1) of the Act - or, for that matter, Section 9D of the Central Excise Act, 1944. 77. The framers of the law having, thus, subjected statements, recorded under Section 108 of the Act, to such a searching and detailed procedure, before they are treated as relevant in adjudication proceedings, we are of the firm view that such statements, which are yet to suffer such processual filtering, cannot be used, straightaway, to oppose a request for provisional release of seized goods. The reliance, in the appeal before us, on various statements recorded during the course of investigation in the present case cannot, therefore, in our view, invalidate the decision, of the Learned Tribunal, to allow provisional release of the seized 25400.06 grams of gold jewellery, covered by Bill of Entry No. 107190, dated 20th April, 2019." (emphasis supplied) 27. In Drolia Electrosteel decided on 30.10.2023, a Division Bench of the Tribunal examined the provisions of section 9D of the Central Excise Act and after placing reliance upon the decision of the Punjab and Haryana High Court in Jindal Drugs, observed that if the mandatory provisions of sect....
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....ntral Excise Act and section 138B(1)(b) of the Customs Act have been held to be mandatory and failure to comply with the procedure would mean that no reliance can be placed on the statements recorded either under section 14D of the Central Excise Act or under section 108 of the Customs Act. The Courts have also explained the rationale behind the precautions contained in the two sections. It has been observed that the statements recorded during inquiry/investigation by officers has every chance of being recorded under coercion or compulsion and it is in order to neutralize this possibility that statements of the witnesses have to be recorded before the adjudicating authority, after which such statements can be admitted in evidence." 25. We also find that as regards the cases of clandestine removals are concerned, the Principal Bench relied upon the judgment of Chhattisgarh High Court in the case of Hi Tech Abrasives Ltd. vs. Commissioner of C. Ex. & Cus., Raipur [2018 (362) E.L.T. 961 (Chhattisgarh)] and held as follows:- "12. ***** Having held that the Director's statement could not be taken into consideration as the same was not relevant and admissible in ....
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....ng the statement of the author, the contents of private document would not constitute material, we are left with no legally admissible evidence on record to draw inference of clandestine removal. *****" (emphasis supplied) 26. We find that Tribunal in the case of Shri V. K. Bhuraria, M/s Brilliant Metals Pvt. Ltd. & 07 others in Excise Appeal No.51356 of 2017 vide Final Order No.51800-51808 of 2018 dated 11.05.2018, in a case involving identical investigation against the same prime accused Shri Amit Gupta held as under:- "4. These companies were issuing invoices with intent to passing enormous amounts of inadmissible cenvat credit to various manufacturers and dealers without delivery of goods. Being Central Excise registered dealers by issue of only invoices, these companies were issuing cenvatable invoices of the said imported and indigenously procured goods without supply of goods to the numerous manufacturers who used to manufacture the final products out of the market scrap which is cheaper in rates. One such company is M/s. Multi Metals Ltd. (appellants). 5. It is the case of the department that during the period 03.02.2016 to 04.02.2016, the appellant ....
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....lid duty paying documents. On final product, the appellant has paid the duty. In the instant case, no evidence other than the statement of supplier and transporter is available. Lastly, he relied on the following case laws: 1. Tejwal Dyestuff Industries vs. CCE [2007 (216) ELT 310 (Tri-Ahmd)]; 2. CCE Vs Valan Beedi Works [2014 (306) ELT 420 (Mad)]; 3. SMI Electrowire Pvt. Ltd. vs. CCE [2015 (322) ELT 447 ( P&H)]; 4. Super Trading Company vs. CCE [2014 (299) ELT 75 (Tri-Del)]; 5. Siddhartha Bronze Products Pvt. Ltd. vs. CCE [2015 (328) ELT 429 (Tri-Ahmd)] 18. On behalf of M/s. Maruti Metal Industries, Shri Sarju Mehta, learned CA on the strength of written submissions, challenged the impugned order on the basis of principles of natural justice. He submits that the allegation is of actual diversion of goods covered by invoices in the domestic open market and flow back of the funds. The demand of duty is not sustainable merely on the basis of submissions made by the transporter of the goods as per the ratio laid down by M/s. Aarya Fibers Pvt. Ltd. & others vs. CCE, Ahmadabad II [2014-TIOL-15-CETAT- Ahmedabad]. Argument of the learn....